Formation: pre-incorporation transactions

Question 1

Promoter roles

Answer 1

-try to find investors willing to invest
-enter into Ks on behalf of corp (even BEFORE it exists)
-promoters are FIDUCIARIES and cannot make secret profits

Question 2

General rule of promoter activities

Answer 2

Corporation NOT liable for pre-incorporation agreements

Question 3

Novation (for promoter)

Answer 3

Agreement that alters default rule and shifts liability from promoter TO CORPORATION

Question 4

Parties to novation

Answer 4

Promoter
Corporation
Third party

Corporation SUBSTITUTED for promoter under this agreement

Question 5

What are promoters liable for?

Answer 5

Ks entered BEFORE corporation exists